SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------
FORM 10-Q
(Mark One)
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
----------------------------------------
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
------------------ -------------------
Commission file number 0-26015
-----------
CRW Financial, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 23-2691986
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(State or other jurisdiction or (I.R.S. employer
incorporation or organization) identification no.)
443 South Gulph Road King of Prussia, PA 19406
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 610/962-5100
----------------
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Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X__ No ____
The number of shares outstanding of the Registrant's common stock is
1,197,696 as of August 5, 1996.
<PAGE>
CRW FINANCIAL, INC. AND SUBSIDIARIES
INDEX
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31, 1995 AND JUNE 30, 1996 3
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS FOR THE THIRTEEN AND TWENTY-SIX
WEEKS ENDED JULY 1, 1995 AND JUNE 30, 1996 4
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS FOR THE TWENTY-SIX WEEKS ENDED
JULY 1, 1995 AND JUNE 30, 1996 5
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION 8
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURES 12
<PAGE>
CRW FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
(unaudited)
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 2,074,000 $ 1,532,000
Cash Held for Clients 3,333,000 3,960,000
Accounts Receivable 3,094,000 4,304,000
Other Current Assets 419,000 674,000
------------ ------------
Total Current Assets 8,920,000 10,470,000
PROPERTY AND EQUIPMENT 3,320,000 3,230,000
------------ ------------
DEFERRED ACQUISITION AND IPO COSTS (Note 6) -- 3,176,000
------------ ------------
INTANGIBLE ASSETS 5,338,000 3,337,000
------------ ------------
OTHER ASSETS 967,000 2,090,000
------------ ------------
$ 18,545,000 $ 22,303,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Collections Due Clients $ 3,333,000 $ 3,960,000
Accounts Payable 2,774,000 2,214,000
Accrued Acquisition & IPO Costs -- 1,985,000
Accrued Expenses 1,845,000 1,974,000
Current Portion of Long-Term Debt 1,385,000 1,386,000
------------ ------------
Total Current Liabilities 9,337,000 11,519,000
------------ ------------
OTHER LONG-TERM LIABILITIES 299,000 241,000
------------ ------------
LONG-TERM DEBT 5,723,000 5,993,000
------------ ------------
COMMITMENTS
STOCKHOLDERS' EQUITY:
Preferred Stock -- 2,391,000
Common Stock 11,000 11,000
Additional Paid in Capital 4,125,000 4,125,000
Accumulated Deficit (950,000) (1,977,000)
------------ ------------
Total Stockholders' Equity 3,186,000 4,550,000
------------ ------------
$ 18,545,000 $ 22,303,000
============ ============
</TABLE>
See notes to condensed consolidated financial statements
-3-
<PAGE>
CRW FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
-------------------- ----------------------
July 1, 1995 June 30, 1996 July 1, 1995 June 30, 1996
------------ ------------- ------------ ------------
(Note 1) (Note 1)
<S> <C> <C> <C> <C>
NET REVENUES $ 8,327,000 $ 8,555,000 $ 16,336,000 $ 17,405,000
OPERATING EXPENSES, excluding
non-cash charges 7,544,000 9,059,000 14,803,000 17,241,000
SPECIAL COMPENSATION CHARGE (Note 6) -- 629,000 -- 629,000
DEPRECIATION 148,000 239,000 296,000 462,000
AMORTIZATION 253,000 122,000 495,000 247,000
------------ ------------ ------------ ------------
Operating Income (Loss) 382,000 (1,494,000) 742,000 (1,174,000)
INTEREST EXPENSE 124,000 194,000 236,000 369,000
------------ ------------ ------------ ------------
Income (loss) from continuing operations
before income taxes 258,000 (1,688,000) 506,000 (1,543,000)
INCOME TAXES (BENEFIT) 97,000 (574,000) 189,000 (516,000)
------------ ------------ ------------ ------------
Income (loss) from continuing operations 161,000 (1,114,000) 317,000 (1,027,000)
GAIN ON SALE OF CENTRAL CREDIT, INC 28,176,000 -- 28,176,000 --
INCOME FROM DISCONTINUED OPERATIONS
OF CENTRAL CREDIT, INC. NET OF TAXES 87,000 -- 567,000 --
------------ ------------ ------------ ------------
Net Income (loss) to Common Shareholders $ 28,424,000 $ (1,114,000) $ 29,060,000 $ (1,027,000)
============ ============ ============ ============
NET INCOME (LOSS) PER COMMON SHARE
Continuing Operations $ 0.11 $ (0.93) $ 0.22 $ (0.86)
Discontinued Operations 19.79 -- 20.13 --
------------ ------------ ------------ ------------
$ 19.90 $ (0.93) $ 20.35 $ (0.86)
============ ============ ============ ============
WEIGHTED AVERAGE
SHARES OUTSTANDING (NOTE 3) 1,428,000 1,197,696 1,428,000 1,197,696
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements
-4-
CRW FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
TWENTY SIX WEEKS ENDED
----------------------
JULY 1, 1995 JUNE 30, 1996
------------ -------------
(Note 1)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
NET INCOME (LOSS) $29,060,000 $(1,027,000)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Special Compensation Charge -- 629,000
Discontinued Operation - Non Cash and
Working Capital Changes 77,000 --
Gain on Sale of CCI (28,176,000) --
Depreciation and amortization 791,000 709,000
Deferred taxes 189,000 (516,000)
(Increase)/decrease in assets
Accounts receivable 53,000 (1,210,000)
Other assets (371,000) (362,000)
Increase(decrease) in liabilities
Accounts payable (871,000) (560,000)
Accrued expenses and Other Liabilities (654,000) 71,000
------------ ------------
Net cash provided by (used in) operating activities 98,000 (2,266,000)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (480,000) (372,000)
Investing activities of discontinued operations (5,000) --
------------ ------------
Net cash used in investing activities (485,000) (372,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of preferred stock -- 2,391,000
Deposit on Acquisition -- (500,000)
Borrowings under subordinated debt -- 2,100,000
Borrowings under line of credit 5,450,000 --
Repayments of long term debt (4,927,000) (698,000)
Payments of Acquisition, IPO and financing costs (319,000) (1,197,000)
------------ ------------
Net cash provided by financing activities 204,000 2,096,000
------------ ------------
DECREASE IN CASH (183,000) (542,000)
------------ ------------
CASH, BEGINNING OF PERIOD 1,174,000 2,074,000
------------ ------------
CASH, END OF PERIOD $ 991,000 $ 1,532,000
============ ============
</TABLE>
See notes to condensed consolidated financial statements
-5-
<PAGE>
CRW FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
1 - BACKGROUND:
CRW Financial, Inc. ("CRW") performs receivables management,
administration and debt collection services for clients primarily in the health
care, student loan, credit card and utility industries, and to commercial
cleints through its wholly owned subsidiary Kaplan & Kaplan, Inc. CRW's
subsidiary Casino Money Centers, Inc. ("CMC"), provides financial support
services to the casino industry. CRW's subsidiaries were subsidiaries of Casino
& Credit Services, Inc. ("CCS") prior to May 11, 1995, and CRW's operations were
a division of CCS from July 1992 to May 11, 1995 when CCS contributed all of its
assets and subsidiaries other than Central Credit, Inc. ("CCI") to a newly
formed subsidiary, CRW Financial, Inc. CCS then spun-off CRW in a distribution
of CRW stock to CCS Shareholders on May 11, 1995. The historical financial
statements of CRW have been deemed to be those of CCS, restated to present CCI
as a discontinued operation.
CRW formed TeleSpectrum Worldwide Inc. ("TWI") in April 1996 to acquire
businesses that provide teleservices solutions to clients in the
telecommunications, insurance, financial services, pharmaceuticals, and
healthcare, consumer products and high technology industies. The accounts of TWI
have been consolidated into CRW's financial statements as of June 30, 1996.
However, upon completion of TWI's initial public offering (see note 6), the
accounts of TWI will no longer be consolidated into CRW's financial statements
as CRW will account for TWI under the equity method of accounting.
2 - BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements have been
prepared in conformity with generally accepted accounting principles. The
interim financial information, while unaudited, reflects all normal recurring
adjustments which are, in the opinion of management, necessary for a fair
presentation of the interim financial statements. The results for the three
months and six months are not necessarily indicative of results expected for the
full year. These financial statements should be read in conjunction with the
audited financial statements and the notes thereto included in the CRW
Financial, Inc. Annual Report on Form 10-K for the year ended December 31, 1995.
3 - NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share for 1995 was computed on a pro forma
basis using the weighted average number of shares of CRW stock and common share
equivalents outstanding as if the distribution of 882,929 shares of CRW common
stock by CCS was made on January 1, 1995. In addition, since CRW common stock
equivalents exceed 20% of the CRW common stock outstanding, the modified
treasury stock method pursuant to Accounting Principles Board Statement No. 15
was utilized to calculate weighted average number of shares of CRW common stock
outstanding, including shares of CRW common stock issuable pursuant to exercises
of the CCS warrants, 490,000 of stock options issued to management of CRW (which
have exercise prices between $2.92 and $5.81 per share) and the warrant to
purchase 91,018 shares of common stock described in Note 4 below. Pro forma net
income per common share for discontinued operations has been computed using the
same weighted average number of common stock equivalents used to compute per
share amounts from continuing operations. Net loss per common share in 1996 was
computed based upon the weighted average number of common shares outstanding
during 1996 as common stock equivalents were anti-dilutive in 1996 due to the
Company's net loss.
4 - DEBT
In connection with the merger and Distribution, CRW assumed the bank
debt of CCS and immediately refinanced it with proceeds from a $6,000,000
three-year revolving line of credit from a bank which bears interest at that
bank's prime rate plus 1 1/2%. The amount available for borrowing under the line
of credit will be reduced by $500,000 after 12 months and by $250,000 every
three months thereafter. In connection with the revolving credit loan, CRW has
issued to the bank warrants to purchase 91,018 shares of its common stock at an
average exercise price of $2.74 per share. Borrowings under the line of credit
are collateralized by substantially all of the assets of CRW. The revolving line
of credit agreement requires that CRW maintain a certain level of stockholders'
equity and other financial ratios. During 1996 CRW was in violation of certain
of these financial covenants. However, the bank waived these violations and
deferred the Company's required August 11, 1996 $250,000 principal payment and
November 11, 1996 $250,000 principal payment until December 31, 1996.
- 6 -
<PAGE>
On May 23, 1996, CRW issued $2,100,000 of subordinated notes to certain
shareholders and employees. The subordinated notes bear interest at 12.5% and
are due upon the earlier of repayment of the Company's bank debt or in quarterly
installments of $262,500 beginning on January 1, 1997. Proceeds from the
subordinated notes were used to capitalize TeleSpectrum Worldwide Inc. ("TWI")
(see note 6). In connection with the subordinated notes, CRW issued warrants to
the subordinated lenders and to CRW's bank to purchase 1,433,454 and 74,445
shares of TWI common stock, respectively, from CRW for $1.50 per share. The
Company obtained an appraisal which indicated that the warrants had a fair value
of $0.75 per warrant on May 23, 1996. Accordingly, the debt was discounted
$1,130,000 to reflect the minority interest resulting from the warrants.
5 - OTHER ASSETS
Other assets include the following:
December 31, 1995 June 30, 1996
----------------- -------------
Investment in RTC Partnerships $310,000 $ 398,000
Deposits 147,000 183,000
Notes Receivable 107,000 590,000
Deferred Tax Asset 403,000 919,000
-------- ----------
$967,000 $2,090,000
======== ==========
6 - TELESPECTRUM WORLDWIDE INC.
On April 29, 1996 CRW formed a wholly owned subsidiary, TeleSpectrum
Worldwide Inc. ("TWI"). TWI entered into asset purchase agreements to acquire
six teleservices businesses for approximately $139,000,000 in cash and TWI
common stock. CRW made a $2,100,000 capital contribution to TWI on May 23, 1996.
On May 23, 1996, in connection with the acquisitions and inital public offering,
CRW issued warrants to its CEO, CFO, Director of Acquisitions and a consultant
to purchase 839,108 shares of TWI stock from CRW at $1.50 per share. The Company
obtained an appraisal which indicated that the warrants had a fair value of
$0.75 per warrant on May 23, 1996. Accordingly, the Company recorded a non-cash
compensation charge of $629,000 on May 23, 1996. TWI's acquisitions and its
initial public offering were completed on August 13, 1996.
As a result of the TWI initial public offering and the warrants
described above and in Note 4, CRW owns 8,510,137 shares of TWI common stock. If
all of the warrants described above and in Note 4 are exercised, CRW will
receive approximately $3,500,000 of cash and would then own 6,162,130 shares of
TWI.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Continuing Operations
Below is a summary of operating results (in thousands) for the
Company's three business segments, CRW Financial, TeleSpectrum Worldwide and
Casino Money Centers.
<TABLE>
<CAPTION>
Thirteen Weeks Ended June 30, 1996
----------------------------------
CRW TeleSpectrum Casino
Financial Worldwide Money Centers Total
--------- --------- ------------- -----
<S> <C> <C> <C> <C>
Net Revenues $ 7,647 $-- $908 $ 8,555
Operating Expenses,
excluding non-cash charges 7,856 419 784 9,059
Special compensation charge 629 -- -- 629
Depreciation 234 -- 5 239
Amortization 115 -- 7 122
------- ----- ---- -------
Operating (Loss) Income $(1,187) $(419) $112 $(1,494)
======= ===== ==== =======
</TABLE>
- 7 -
<PAGE>
Thirteen Weeks Ended July 1, 1995
---------------------------------
CRW Casino
Financial Money Centers Total
--------- ------------- -----
Net Revenues $7,597 $ 730 $8,327
Operating Expenses,
excluding non-cash charges 6,986 558 7,544
Depreciation 147 1 148
Amortization 247 6 253
------ ------ ------
Operating Income $ 217 $ 165 $382
====== ====== ======
Thirteen Weeks Ended June 30, 1996 and July 1, 1995
Net Revenues. Net revenues for the thirteen weeks ended June 30, 1996
increased $228,000 (2.7%) to $8,555,000 from $8,327,000 for the thirteen weeks
ended July 1, 1995.
CRW Financial's revenues for the thirteen weeks ended June 30, 1996
increased $50,000 (0.7%) to $7,647,000 compared to $7,597,000 for the thirteen
weeks ended July 1, 1995 primarily due to revenues of $662,000 from CRW's Market
Research Division which began operations in January 1996, offset by a $612,000
decrease in CRW's collection revenues. The decrease was primarily due to lower
revenues from the RTC and the loss of approximately $250,000 of revenues from
Bell South.
Casino Money Centers revenues for the thirteen weeks ended June 30,
1996 increased $178,000 (24.4%) to $908,000 from $730,000 from the thirteen
weeks ended July 1, 1995 primarily due to increased volume at the facility in
the Oneida Casino in Green Bay, Wisconsin and the opening of a CMC facility in
the Northstar Casino in Bowler, Wisconsin in December 1995.
Operating Expenses. Operating expenses increased $2,104,000 (26.5%) to
$10,049,000 for the thirteen weeks ended June 30, 1996 from $7,945,000 for the
thirteen weeks ended July 1, 1995.
CRW Financial's operating expenses increased $1,454,000 (19.7%) to
$8,834,000 for the thirteen weeks ended June 30, 1996 from $7,380,000 for the
thirteen weeks ended July 1, 1995 primarily due to the start-up of its Market
Research Division, the $629,000 special compensation charge discussed in Note 6
and the $419,000 operating loss of TeleSpectrum. TeleSpectrum had no revenue
generating operations in 1996. The $419,000 of costs incurred were previously
for the payroll costs for the President and CFO of TeleSpectrum and for an
executive recruiting fee for the President.
Casino Money Centers operating expenses increased $231,000 (40.9%) to
$796,000 for the thirteen weeks ended June 30, 1996 from $565,000 for the
thirteen weeks ended July 1, 1995, primarily due to increased operating expenses
from the increased volume at the Oneida facility.
Depreciation expense increased $91,000 to $239,000 for the thirteen
weeks ended June 30, 1996 from $148,000 for the thirteen weeks ended July 1,
1995 due to capital expenditures in 1995 and 1996.
Amortization decreased $131,000 to $122,000 for the thirteen weeks
ended June 30, 1996 from $253,000 for the thirteen weeks ended July 1, 1995
primarily due to the expiration in July 1995 of a $3,000,000 three year
non-compete agreement with TRW Inc.
Operating Income (loss) The Company generated an operating loss of
$1,494,000 for the thirteen weeks ended June 30, 1996 compared to operating
income of $382,000 for the thirteen weeks ended July 1, 1995 due to the $228,000
increase in net revenues, offset by the $2,104,000 increase in operating
expenses.
Interest Expense. Interest expense was $194,000 for the thirteen weeks
ended June 30, 1996 compared to $124,000 for the thirteen weeks ended July 1,
1995. The increase in interest expense was due to borrowings made in 1996 for
capital expenditures and to increase working capital.
-8-
<PAGE>
Income Taxes (Benefit). The income tax benefit was $574,000 for the
thirteen weeks ended June 30, 1996 compared to a $97,000 provision for the
thirteen weeks ended July 1, 1995, reflecting an effective tax rate of
approximately 34% for the thirteen weeks ended June 30, 1996 and 38% for the
thirteen weeks ended July 1, 1995.
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended June 30, 1996
------------------------------------
CRW TeleSpectrum Casino
Financial Worldwide Money Centers Total
--------- --------- ------------- -----
<S> <C> <C> <C> <C>
Net Revenues $15,651 $ -- $1,754 $17,405
Operating Expenses,
excluding non-cash charges 15,274 419 1,548 17,241
Special compensation charge 629 -- -- 629
Depreciation 452 -- 10 462
Amortization 234 -- 13 247
------- ----- ------ -------
Operating Income (loss) $ (938) $(419) $ 183 $(1,174)
======= ===== ====== =======
</TABLE>
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended July 1, 1995
-----------------------------------
CRW TeleSpectrum Casino
Financial Worldwide Money Centers Total
--------- --------- ------------- -----
<S> <C> <C> <C> <C>
Net Revenues $15,014 $ -- $1,322 $16,336
Operating Expenses,
excluding non-cash charges 13,738 -- 1,065 14,803
Depreciation 294 -- 2 296
Amortization 484 -- 11 495
------- ----- ------ -------
Operating Income $498 $ -- $ 244 $742
======= ===== ====== =======
</TABLE>
Twenty-Six Weeks Ended June 30, 1996 and July 1, 1995
Net Revenues. Net revenues for the twenty-six weeks ended June 30, 1996
increased $1,069,000 (6.5%) to $17,405,000 from $16,336,000 for the twenty-six
weeks ended July 1, 1995.
CRW Financial's revenues for the twenty-six weeks ended June 30, 1996
increased $637,000 (4.2%) to $15,651,000 compared to $15,014,000 for the
twenty-six weeks ended July 1, 1995 primarily due to revenues of $1,356,000 from
CRW's Market Research division, partially offset by a $719,000 decrease in CRW's
collection revenues. The decrease in collection revenues was primarily due to
the loss of approximately $500,000 of revenue from Bell South and decreased
revenue from the RTC.
Casino Money Centers revenues for the twenty-six weeks ended June 30,
1996 increased $432,000 (32.7%) to $1,754,000 from $1,322,000 for the twenty-six
weeks ended July 1, 1995 primarily due to increased volume at the Oneida
facility and the opening of the Northstar facility
Operating Expenses. Operating expenses increased $2,985,000 (19.1%) to
$18,579,000 for the twenty-six weeks ended June 30, 1996 from $15,594,000 for
the twenty-six weeks ended July 1, 1995.
CRW Financial's operating expenses increased $2,073,000 (14.3%) to
$16,589,000 for the twenty-six weeks ended June 30, 1996 from $14,516,000 for
the twenty-six weeks ended July 1, 1995 primarily due to TeleSpectrum's
operating costs of $419,000 incurred for the payroll costs for the President and
CFO of TeleSpectrum and for an executive recruiting fee for the President.
- 9 -
<PAGE>
Casino Money Centers operating expenses increased $493,000 (45.7%) to
$1,571,000 for the twenty-six weeks ended June 30, 1996 from $1,078,000 for the
twenty-six weeks ended July 1, 1995, primarily due to increased operating
expenses from the Oneida facility and expenses from the Northstar facility.
Depreciation expense increased $166,000 to $462,000 for the twenty-six
weeks ended June 30, 1996 from $296,000 for the twenty-six weeks July 1, 1995
due to capital expenditures in 1995 and 1996.
Amortization decreased $248,000 to $247,000 for the twenty-six weeks
ended June 30, 1996 from $495,000 for the twenty-six weeks ended July 1, 1995
due to the expiration in July 1995 of a $3,000,000 three year non-compete
agreement with TRW Inc.
Operating Income (loss). The Company generated an operating loss of
$1,174,000 for the twenty-six weeks ended June 30, 1996 compared to operating
income of $742,000 for the twenty-six weeks ended July 1, 1995 due to the
$1,069,000 increase in net revenues, offset by the $2,985,000 increase in
operating expenses.
Interest Expense. Interest expense increased $133,000 to $369,000 for
the twenty-six weeks ended June 30, 1996 from $236,000 for the twenty-six weeks
ended July 1, 1995 primarily due to borrowings made in 1996 for capital
expenditures and working capital.
Income Tax (Benefit). The income tax benefit was $516,000 for the
twenty-six weeks ended June 30, 1996 compared to a provision of $189,000 for the
twenty-six weeks ended July 1,1995. The effective tax rate was approximately 34%
for the twenty-six weeks ended June 30, 1996 and 38% for the twenty-six weeks
ended July 1, 1995.
INFLATION
Inflation has not had a significant impact on the Company's operations
to date.
LIQUIDITY AND CAPITAL RESOURCES
During the twenty-six weeks ended June 30, 1996 net cash used in
operating activities was $2,266,000 compared to $98,000 of cash provided by
operating activities for the twenty-six weeks ended July 1, 1995. The increase
in cash used in operating activities in the 1996 period was primarily due to the
net loss in 1996 and the $1,210,000 increase in accounts receivable and the
$560,000 decrease in accounts payable in 1996.
Net cash used in investing activities was $372,000 during the
twenty-six weeks ended June 30, 1996 and consisted solely of capital
expenditures compared to $485,000 for the net cash used in investing activities
for the twenty-six weeks ended July 1, 1995 which consisted primarily of capital
expenditures.
Net cash provided by financing activities during the twenty-six weeks
ended June 30, 1996 was $2,096,000 due to $2,391,000 of proceeds from the sale
of preferred stock, $2,100,000 of borrowings under subordinated notes, partially
offset by $698,000 of repayments of bank debt and a $500,000 deposit on a TWI
acquisition. Net cash provided by financing activities was $ 204,000 for the
twenty-six weeks ended July 1, 1995 and consisted of $523,000 of net borrowings
and $319,000 of payments for financing costs
CRW believes that its existing cash on hand, cash to be generated from
future operations, and cash anticipated to be generated from exercises of
outstanding options and warrants to purchase CRW's common stock will be adequate
to meet its needs for the foreseeable future.
SEASONALITY
CRW's receivables management business is subject to seasonality which is
experienced by most industry competitors. The effect of the seasonality is to
reduce collection recovery rates in the months of July through December as
compared to January through June. The cause of the decrease in collection
recovery rates is due to consumer spending for vacations and holidays in the
second half of the year. Historically, CRW's collection revenues have decreased
5% to 10% in the third and fourth quarters (excluding increases in revenue from
newly acquired businesses) as compared to the first and second quarters. Because
the collection business has a high level of fixed costs, the decrease in
revenues in the third and fourth quarters has historically reduced operating
income.
- 10 -
<PAGE>
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) CRW did not file any reports on Form 8-K during the
quarter ended June 30, 1996
- 11 -
<PAGE>
CRW FINANCIAL, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
CRW FINANCIAL, INC.
(Registrant)
Date: August ____, 1996 _____________________________________________
Jonathan P. Robinson, Chief Financial Officer
- 12 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,532,000
<SECURITIES> 0
<RECEIVABLES> 4,304,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,470,000
<PP&E> 3,230,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 11,519,000
<BONDS> 0
0
2,391,000
<COMMON> 11,000
<OTHER-SE> 4,125,000
<TOTAL-LIABILITY-AND-EQUITY> 22,303,000
<SALES> 17,405,000
<TOTAL-REVENUES> 17,405,000
<CGS> 17,241,000
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</TABLE>
